Section 5: State and Local Government Spending and Revenues

Total expenditures for all 50 states in the United States was $1,406 billion in 2004, $1,552 billion in 2006 (an increase of 10.4%), $1,635 billion in 2007 (an increase of 5.3%) $1,826 billion in 2009 (an increase of 11.7%), $2,003 billion in 2011 (an increase of 9.7%), $2,006 billion in 2013 (an increase of 0.1%), $2,036 billion in 2014 (an increase of 1.5%), and $2,192 billion in 2015 (latest year available – an increase of 7.7%). General expenditures by function rounded in billions of dollars are listed in the table below.

Education is the single-largest expenditure by state governments, followed by public welfare. The expense on education is shared by states and counties, with the counties spending the majority of their funds on county public schools, and the states sharing the burden of financing post-secondary state education. The programs that experienced large increases in their budgets in recent years include education, welfare, health, highways, and insurance trusts.

Public welfare expenditures include unemployment compensation payments, food stamps, school lunch subsidies, and other income maintenance programs.

Spending Item

2004 Spending in billions (rounded to the nearest billion)

2006 Spending in billions (rounded to the nearest billion)

2007 Spending in billions (rounded to the nearest billion)

2009 Spending in billions (rounded to the nearest billion)

2011 Spending in billions (rounded to the nearest billion)

2013 Spending in billions (rounded to the nearest billion)

2014 Spending in billions (rounded to the nearest billion)

2015 (latest available year) Spending in billions (rounded to the nearest billion)

Total revenue for all 50 states in the United States was $1,587 billion in 2004, $1,773 billion in 2006 (an increase of 11.7%), $1,993 billion in 2007 (an increase of 12.4%), $1.891 billion in 2009 (a decrease of 5.1%), $2,266 billion in 2011 (an increase of 19.8%), $2,216 billion in 2013 (a decrease of 2.2%), $2,360 billion in 2014 (an increase of 6.5%), and $2,204 billion in 2015 (latest year available – a decrease of 6.6%). Because of the 2008 recession and the fluctuations in the amount of funding in the insurance trusts, the tax revenue for many of our states dropped considerably in 2009, but increased in most years thereafter because of a pickup in economic activity. Revenues by type of tax or source rounded in billions of dollars are listed in the table below.

Federal grants are the largest source of income for all states, followed by insurance trust revenue. Of the tax sources, general and selective sales taxes and individual income taxes provide the most money for most of the states. All states collect sales taxes, except Alaska, Delaware, Montana, New Hampshire and Oregon. California has the highest statewide sales tax of 7.5%. This includes a mandatory local rate of 1%. The rate can vary among local areas as some counties add their own sales taxes. For example, in some local parts of California the rate can be as high as 10%. In parts of the state of New York the combined state and county sales tax is 9%.

General sales taxes are consumption taxes on general items such as food, clothing, electronics, furniture, etc. Selective sales taxes are consumption taxes similar to federal excise taxes. They are levied on products such as gasoline, tobacco, alcoholic beverages, and insurance premiums.

Revenue Item

2004 Revenue in billions (rounded to the nearest billion)

2006 Revenue in billions (rounded to the nearest billion)

2007 Revenue in billions (rounded to the nearest billion)

2009 Revenue in billions (rounded to the nearest billion)

2011 Revenue in billions (rounded to the nearest billion)

2013 Revenue in billions (rounded to the nearest billion)

2014 Revenue in billions (rounded to the nearest billion)

2015 (latest available year) Revenue in billions (rounded to the nearest billion)

Below is a table with a summary of local government (mostly counties) spending in the United States. The single largest spending component by counties is education (public schools and community colleges). The United States Census Bureau reports that average education spending per pupil in the United States was $11,392 during fiscal year 2017. New York tops the list with $21,206 spent per pupil. Other high spenders were Alaska ($20,172), the District of Columbia ($19,396), Connecticut ($18,377), and New Jersey ($17,235). States with the lowest per student expenditures (2015) were Idaho with $6,923 and Utah with $6,575. Of the 100 largest school systems in the United States, Maryland had 4 in the top 10 with regards to per pupil spending.

Counties receive revenue from a variety of sources. States provide general funding to counties. In addition, counties collect taxes, including property taxes, sales taxes, individual income taxes, motor vehicle taxes, real estate transfer taxes, cable television franchise taxes, and hotel/motel taxes. State law dictates the tax that counties are allowed to levy. The property tax is the single most important source of revenue for counties. Nearly half of the states allow their counties to collect sales taxes, which is the second most important source of revenue for most counties. Individual income taxes are collected by counties only in Indiana and Maryland.